Parkway Properties Inc. (NYSE: PKY) purchased a stake in a joint venture that owns a portfolio of five office properties in Austin, Texas for roughly $41.5 million.

The Orlando, Fla.-based real estate firm was required to buy the stake once it completed a $1.2 billion merger with Thomas Properties Group Inc. in December. The JV was held between Thomas Properties and private equity firm Madison International Realty. As a result of the merger, Madison had the right to require that Parkway purchase a stake of about 17 percent in the CalSTRS JV. New York-based Madison exercised this right on Dec. 26.

The transaction gives Parkway a stake in TPG/CalSTRS Austin LLC, a joint venture with the California State Teachers' Retirement System that owns Frost Bank Tower, One Congress Plaza, One American Center, 300 West 6th Street and San Jacinto Center in the central business district of Austin, Texas.

Parkway president and chief James Heistand (pictured) says the deal allows Parkway to continue expand within the Austin market and create value for stockholders.

The deal also gives Parkway a 50 percent interest in the Austin properties, with CalSTRS owning the other half. CalSTRS now has until Feb. 5 to exercise an option to buy up to 60 percent of Madison's former interest on the same terms as Parkway. If CalSTRS exercises its option to take over this portion of Madison's former interest, Parkway's interest in the Austin properties will be reduced to 40 percent, with CalSTRS owning the remaining 60 percent.

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